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Eliciting Time Preferences When Income and Consumption Vary: Theory, Validation & Application to Job Search

Michèle Belot, Philipp Kircher and Paul Muller

No 14091, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We propose a simple method for eliciting individual time preferences without estimating utility functions even in settings where background consumption changes over time. It relies on lottery tickets with high rewards. In a standard intertemporal choice model high rewards decouple lottery choices from variation in background consumption. We validate our elicitation method experimentally on two student samples: one asked in December when their current budget is reduced by extraordinary expenditures for Christmas gifts; the other asked in February when no such extra constraints exist. We illustrate an application of our method with unemployed job seekers which naturally have income/consumption variation.

Keywords: job search; experimental elicitation; time preferences; hyperbolic discounting (search for similar items in EconPapers)
JEL-codes: D90 J64 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2021-02
New Economics Papers: this item is included in nep-dge, nep-exp, nep-lab, nep-ore and nep-upt
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Forthcoming - forthcoming in: American Economic Journal: Microeconomics

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Working Paper: Eliciting time preferences when income and consumption vary: Theory, validation & application to job search (2021) Downloads
Working Paper: Eliciting time preferences when income and consumption vary: Theory, validation & application to job search (2021) Downloads
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